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International Paper extends Temple-Inland deal

by William McConnell | Published December 20, 2011 at 10:14 AM

International Paper Co. and Temple-Inland Inc. said Monday, Dec. 19, that they have agreed to give the Department of Justice more time to review their pending $4.3 billion merger, guaranteeing that the deal won't close in 2011.

The extension gives the DOJ until Jan. 27 before the companies can consummate the deal. On Monday, the companies also agreed to extend the outside date under their merger agreement from June 6 to June 28, 2012. Previously, the companies had agreed not to consummate their merger before Dec. 31, 2011.

An International Paper spokesman did not respond to a request for comment, but merging parties typically enter timing agreements with regulators when they are working out divestitures or other conditions necessary to win antitrust approval.

IP and Temple-Inland are the No. 1 and No. 3 producers of containerboard, respectively, in the U.S. Combined, they would have 38% of the country's containerboard capacity. The national market share does not pose a problem, antitrust experts said, because there are a significant number of competitors, but regional divestitures may be necessary.

Analysts examining the deal have noted there are 18 states where IP and Temple-Inland both have corrugated container facilities: Arkansas, California, Colorado, Florida, Illinois, Indiana, Louisiana, Minnesota, Missouri, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas and Virginia.

IP and other major corrugated container manufacturers are also the subject of a private antitrust suit filed by Kleen Products LLC and other users of corrugated containers, alleging that the manufacturers have been engaging in illegal collusion that has resulted in higher prices.

The containerboard industry, like other sectors involving commodity products, is of long-standing concern to antitrust regulators because inelastic demand for the products from shippers of goods and a single manufacturer's inability to control prices gives producers incentive to collude on prices and constrain supply.

Other major players in the market are Georgia-Pacific Corp., Rock-Tenn Co. and Packaging Corp. of America.

IP would owe Temple-Inland a $200 million breakup fee were the DOJ successful in blocking the merger.

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